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Canada’s largest grocers, including Sobeys Inc. and Metro Inc., were allegedly involved in the 14-year scheme to fix bread prices, according to court documents unsealed on Wednesday.

The two companies continue to deny involvement in the criminal scheme, made public in December.

The Competition Bureau says Canada's two largest bread wholesalers, along with major grocers, agreed to raise bread prices. (The Canadian Press)

Loblaw Companies Ltd. and George Weston Ltd. have admitted their participation and received immunity from prosecution from the Competition Bureau.

The court documents released Wednesday provide more details on how the scheme allegedly worked: the agreed-upon price increases were on average, about 10 cents per product per year, with seven cents going to the suppliers and three cents to the retailers.

The pattern became known colloquially as “the 7/10 convention.”

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The allegations are contained in documents filed in court to support search warrants in the case. The allegations have not been proven in court.

Canada Bread, the largest bakery in Canada, was the pricing leader and Weston Bakeries was a follower, according to the documents, which itemize 15 individual price increases between 2001 and late 2015.

Senior officers at Canada Bread and Weston Bakeries agreed to fix wholesale prices of bread and then met individually with their retail customers to get them to agree to the fixed price, according to the documents.

It was referred to in the industry as “socialization.”

Under the Competition Act, penalties for price-fixing include fines of up to $25 million and imprisonment to a maximum term of 14 years, or both. (Rick Madonik / Toronto Star File Photo)

The documents allege that during supplier-retail meetings, Loblaw, Walmart, Sobeys, Metro and Giant Tiger accepted price increases on the condition that retail competitors would also do so.

And the retailers demanded that the bakeries actively manage competition by ensuring price alignment amongst the retailers.

According to the allegations, a Walmart buyer approached Weston Bakeries in 2013 asking Weston Bakeries to co-ordinate an increase in retail prices on Weight Watchers products across No Frills, Walmart, Giant Tiger, Food Basics and FreshCo banners.

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In one email thread, a Sobeys employee asks Weston Bakeries: “Do you know when No Frills will be increasing the retails on bread?”

The documents also allege that Weston Bakeries had an active network of salespeople communicating with the retailers, seeking to ensure that there was pricing alignment.

Retailers often complained to Weston Bakeries about prices at their retail competitors that they did not like, according to the documents.

“Why would they go this cheap,” a Metro employee was quoted as saying in an email about low bread prices at Giant Tiger. “You’re upsetting the market. One crazy retailer will cause other (retailers) to (decrease their retail prices) and it’ll get aggressive and therefore drive the overall retails down.”

In an email dated July 2015, a Sobeys employee sent a message to Weston Bakeries questioning the pricing of bread at conventional banners. “I thought we were all accepting inflation due to the increase.”

The prices were allegedly set months in advance.

Have your say

Both Metro and Sobeys, which have consistently denied involvement, issued strong statements on Wednesday.

“It doesn’t mean that we are guilty of anything because our colleague’s name is in the document,” said Metro spokesperson Marie-Claude Bacon.

“Our suppliers informed us at some point in time of the new prices, but it certainly doesn’t mean that we agreed with the other retailers and suppliers to increase the price, it’s not the same thing at all. We need to discuss with each of our suppliers the price of the products we are to sell; there is nothing illegal in that. We have to have those discussions.”

Sobeys issued a statement Wednesday saying it remains confident in its position.

“We do not believe the information about us as presented in the court documents released today amounts to a contravention of the Competition Act,” according to Sobeys spokesperson Cynthia Thompson.

“There are very few references to Sobeys in the documents. The Sobeys employees named are valued members of our team and we are confident that they did nothing that contravenes the Competition Act.

“We constantly communicate with and push our suppliers so that we can buy from them at the lowest possible cost, which allows us to offer competitive prices to our customers. It’s typical in the grocery industry, and I would say broad retail industry, for employees to regularly monitor and spot check pricing in the marketplace to ensure competitive pricing to customers.”

Michael Medline, president and CEO of Empire Company Ltd., the parent of Sobey’s, went further: “We disagree completely with irresponsible allegations of “industry-wide” bread price-fixing and reckless attempts at trying to drag us into this debacle. We will fight false allegations with all of our energy in the courts.”

Giant Tiger issued this statement: “Giant Tiger reaffirms our previous assertion that we have no reason to believe that Giant Tiger or any of our employees has violated the Competition Act.”

Walmart Canada said it takes its legal obligations very seriously. “We will not comment on this matter as it is before the courts,” said a spokesperson.

Canada Bread, owned by Mexico-based food industry giant Grupo Bimbo, posted a statement to its website saying that Canada Bread was under different ownership in 2001.

“The allegations do not reflect the Canada Bread we know. Our current leadership takes these allegations very seriously and are actively investigating to take the necessary measures.”

Loblaw said in a statement that it stands by its December statement that the price-fixing problem was industry-wide.

“The bureau’s own document is unequivocal. They believe that the seven companies they name as participants committed an indictable offence.

“We have admitted our role, and you cannot price fix alone.”

Galen G. Weston is chairman and CEO of both Loblaw Cos. and George Weston Ltd.

Bruce Cran, president of the Consumers’ Association of Canada said he was amazed to learn that price fixing went on for 14 years before it was uncovered.

“Consumers want assurances that this sort of thing cannot be tolerated in future. If those people aren’t held accountable, why won’t someone else do it tomorrow afternoon?”

“In general food prices are a problem for people on social assistance. Bread price-fixing makes it worse,” said Yogi Acharya, an organizer with the Ontario Coalition Against Poverty.

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